Pakistan and the United States Generalized System of Preferences (GSP)
The report titled “Pakistan and the United States Generalized System of Preferences (GSP)” is part of the Market Access Series...
The report titled “Pakistan and the United States Generalized System of Preferences (GSP)” is part of the Market Access Series 2023-24 published by the Pakistan Business Council (PBC).
The United States Generalized System of Preferences:
The United States GSP program is a unilateral program which provides duty-free entry for about 3,500 products imported into the United States from 119 designated Developing Beneficiary Countries (BDCs) and territories. Pakistan is one of the 119 designated BDCs. However, very few textile and apparel products qualify for US GSP treatment.
Although the US GSP program expired in 2020 and is in the process of reauthorization, duties paid on US GSP imports during the lapsed period are subject to reimbursement after the program’s revival.
In 2023, $18.12 billion worth of US imports were claimed to receive duty-free preference under the GSP program. Indonesia ($3.56 billion) was the top beneficiary followed by Thailand ($3.10 billion), Cambodia ($2.93 billion), Brazil ($2.53 billion), and the Philippines ($1.80 billion). Imports from Pakistan under the GSP program were worth $0.28 billion. As of 2023, Pakistan is the 10th largest US GSP beneficiary country.
Section 301 Tariffs on China & reorientation of global value chains:
Additional Section 301 tariffs imposed on China by the Trump administration caused a shift in supply chains for GSP eligible products toward GSP beneficiary countries. Following the decline in US imports from China, GSP beneficiary countries (Thailand, Indonesia, Cambodia, Brazil, and others) have benefitted from this market gap. This report discusses the impact of Section 301 tariffs on US imports from China and US imports from GSP beneficiary countries in detail.
Pakistan- US Trade:
The figure below shows top 10 items at HS-02 level imported by the US under the GSP program from Pakistan in 2022 and 2023.
Figure: US GSP Imports from Pakistan (HS-02) Level
Source: USITC DataWeb
The top 10 categories at HS-02 level of US GSP imports from Pakistan were valued at $219.86 million in 2023, contributing 79.8 percent to the total US imports from Pakistan under GSP.
Pakistan did not fully utilize the GSP program. Even though $352.81 million worth of goods were eligible for duty-free access into the US in 2023, only $275.6 billion worth of goods availed zero duty preference, leading to a utilization rate of 78.11 percent.
The report lists 25 GSP-eligible items at HS-06 level for which Pakistan has the highest export potential. Altogether, the trade potential for Pakistan to export to the US for these commodities sums up to a total of more than $1.69 billion.
The 35 GSP eligible items at HS-08 level, with values greater than $2.0 million for each product, which Pakistan exports to the world but not to the US under GSP are listed in the table below. The aggregated value of these commodities account for approximately $954.72 million.
Table: US GSP eligible items which Pakistan does not Export to the US (HS-08 level)
| HTS Number | Description | Pakistan’s Exports to the World (2022) US$ in Million | US Imports from the World (2022) US$ in Million | MFN Tariff Rate |
|---|---|---|---|---|
| 7403.19.00 | Copper, refined, unwrought (excluding copper in the form of billets, wire-bars, cathodes and … | 665.72 | 12.02 | 1.00% |
| 7801.10.00 | Unwrought lead, refined | 33.37 | 1,218.44 | 2.5% on the value of the lead content |
| 2836.20.00 | Disodium carbonate | 22.56 | 4.24 | 1.20% |
| 3503.00.10 | Gelatin, whether or not in square or rectangular sheets, whether or not surface-worked or coloured, … | 21.97 | 2.77 | 2.45% |
| 3903.11.00 | Expansible polystyrene, in primary forms | 21.37 | 581.33 | 6.50% |
| 4411.93.90 | Fibreboard of wood or other ligneous materials, whether or not agglomerated with resins or … | 19.39 | 8.81 | 3.90% |
| 1108.12.00 | Maize starch | 18.87 | 59.21 | 0.44% |
| 2603.00.00 | Copper ores and concentrates | 12.62 | 122.7 | 1.7 cents/kg on lead content |
| 0303.53.00 | Frozen sardines “sardina pilchardus, sardinops spp.”, sardinella “sardinella spp.”, brisling … | 11.24 | 7.38 | 0.74% |
| 2306.41.00 | Oilcake and other solid residues, whether or not ground or in the form of pellets, resulting … | 11.13 | 1,216.16 | 0.61% |
| 2001.90.10 | Vegetables, fruit, nuts and other edible parts of plants, prepared or preserved by vinegar … | 10.71 | 7.22 | 8.00% |
| 0303.33.00 | Frozen sole “solea spp.” | 9.62 | 11.6 | 0.22% |
| 1103.13.00 | Groats and meal of maize “corn” | 9.09 | 15.63 | 0.36% |
| 0407.11.00 | Fertilised eggs for incubation, of domestic fowls | 7.37 | 52.06 | 0.09% |
| 7801.91.00 | Unwrought lead, containing by weight antimony as the principal other element | 7.08 | 81.13 | 2.5% on the value of the lead content |
| 0407.19.00 | Fertilised birds’ eggs for incubation (excluding of domestic fowls) | 6.81 | 40.83 | 0.13% |
| 7113.19.10 | Articles of jewellery and parts thereof, of precious metal other than silver, whether or not … | 5.96 | 32.3 | 7.00% |
| 7403.21.00 | Copper-zinc base alloys “brass” unwrought | 5.86 | 136.45 | 1.00% |
| 8414.51.90 | Table, floor, wall, window, ceiling or roof fans, with a self-contained electric motor of an … | 5.50 | 830.79 | 4.70% |
| 7403.13.00 | Copper, refined, in the form of billets | 5.04 | 32.49 | 1.00% |
| 3604.90.00 | Signalling flares, rain rockets, fog signals and other pyrotechnic articles (excluding fireworks … | 5.03 | 22.68 | 6.50% |
| 0501.00.00 | Human hair, unworked, whether or not washed or scoured; waste of human hair | 4.34 | 0.68 | 1.40% |
| 6802.10.00 | Tiles, cubes and other processed articles of natural stone, incl. slate, for mosaics and the … | 4.04 | 142.79 | 4.80% |
| 8544.49.90 | Electric conductors, for a voltage <= 1.000 v, insulated, not fitted with connectors, n.e.s: … | 3.71 | 1,021.39 | 3.90% |
| 3808.91.10 | Insecticides (excluding goods of subheading 3808.50): mosquito coils, mats, aerosol sprays … | 2.90 | 12.4 | 2.80% |
| 1602.32.00 | Meat or offal of fowls of the species “gallus domesticus”, prepared or preserved (excluding … | 2.85 | 424.14 | 6.40% |
| 1104.23.00 | Hulled, pearled, sliced, kibbled or otherwise worked maize grains (excluding rolled, flaked, … | 2.72 | 67.89 | 0.79% |
| 2847.00.00 | Hydrogen peroxide, whether or not solidified with urea | 2.69 | 41.47 | 3.70% |
| 7403.22.00 | Copper-tin base alloys “bronze” unwrought | 2.28 | 9.16 | 1.00% |
| 8507.60.00 | Lithium-ion accumulators (excluding spent) | 2.28 | 13,082.76 | 3.40% |
| 0407.21.00 | Fresh eggs of domestic fowls, in shell (excluding fertilised for incubation) | 2.25 | 7.34 | 0.14% |
| 7903.10.00 | Zinc dust | 2.18 | 45.36 | 0.19% |
| 2917.35.00 | Phthalic anhydride | 2.08 | 53.75 | 6.50% |
| 8515.39.00 | Machines for arc welding of metals, incl. plasma arc welding, neither fully nor partly automatic | 2.07 | 176.85 | 1.60% |
| 2917.32.00 | Dioctyl orthophthalates | 2.02 | 17.79 | 6.50% |
| Total | 954.72 | 19,600.01 | ||
| Source: ITC Trade Map, USITC DataWeb | ||||
The report provides links where products can be looked up to see their eligibility under the US GSP program.
Recommendations:
Steps after the US GSP reauthorization: After the reauthorization of the US GSP program, Pakistan’s government needs to study the changes introduced in the eligibility criteria of the program and update exporters from Pakistan to avoid any inconvenience as well as any additional opportunities that might have become available.
Increase awareness about the US GSP program: Many exporters in Pakistan are either unaware of the GSP eligible items or of the procedure to be followed during the lapse in the reauthorization of the US GSP program. Despite instructions provided by CBP[1], imports from Pakistan under GSP have reduced by 20.4 percent in the period of 2022- 2023. Low utilization rate of GSP-eligible products indicates less awareness about the product’s eligibility under the US GSP program among Pakistani exporters & US importers who end up paying MFN duties on these products. To fully optimize the US GSP program, the Government of Pakistan should provide instructions to exporters in Pakistan to continue labeling GSP-eligible products to ensure that GSP benefits can be claimed after reauthorization.
Utilize the US GSP as a market entry tool: The report identifies that at the HS-08 level, there are 35 GSP-eligible items with an export value greater than $2.0 million that Pakistan currently does not export to the US.[2] These include products mainly in the category of copper alloys, unwrought lead, electric machinery equipment, fish, and birds’ eggs. The US imports these items from other countries in significant quantities. Exporters from Pakistan can utilize the US GSP as a market entry tool for these products.
Diversify exports towards GSP-eligible goods: While textiles, leather, plastics, and a few other commodities remain Pakistan’s top exports to the US, exporters from Pakistan should look for GSP-eligible products within existing industries and gradually allocate resources towards the production of these products. Many GSP-eligible items at HS-06 level with high export potential, fall within the categories of plastics, toys and games, textiles, leather, and edible fruits.[3] Exporters from Pakistan can look to exploit the US market for products in tariff lines which fall under the US GSP program.
Benefit from Section 301 Tariffs imposed on China: There are many GSP eligible products listed in Section 301 tariffs that Pakistan exports to the US. The Government of Pakistan should work closely with Pakistani manufacturers to identify such US GSP eligible products for which the production capacity can be enhanced and the market gap can be filled for products impacted by Section 301 tariffs. The government should initiate negotiations with China to encourage Chinese companies to relocate to Pakistan to produce GSP eligible products and export these to the US duty-free.
Leveraging from E-commerce: E-commerce platforms can serve as a great tool to reach wider consumer segments in the US. Exporters from Pakistan should make use of online marketplaces to develop a strong brand identity and deploy market research and advertising tools to attract US consumers for GSP-eligible products.
Facilitating trade and partnerships: Exporters need to collaborate closely with the government for improved access to information regarding GSP benefits and eligibility requirements. Exporters could work on strengthening relationships with US importers for GSP-eligible products. This will help exporters establish a strong foothold in the US market to maximize the benefits offered by the US GSP program.
TDAP & Pakistan’s Commercial Counsels need to showcase GSP eligible items through trade shows: The Trade Development Authority of Pakistan (TDAP) in collaboration with Pakistan’s Commercial Counsels in the US & Pakistani exporters should plan on holding trade shows exclusively dedicated to GSP eligible items.
Help Pakistani exporters of fresh edible fruits comply with US Health Regulations: Edible fruits are a big-ticket item under the US GSP program, Pakistani exporters need to be facilitated in complying with US SPS requirements to enable them to exploit this opportunity.
The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk
[1] Customs and Border Protection
[2] A list of these items can be found under Table 24
[3] A list of these items can be found under Table 25
